Donald, do not touch the tough regulations.

Yellen is a tough lady, Trump is meanwhile her President. I mean she’s an American and he’s the American President. As for acting in concert however, they are not the best pals. Yellen recently said that the next financial crisis should not happen within our life time. The reason was because the financial market has learnt its lessons and the regulations have been tightened. Guess what, President Donald Trump wanted to lift some of these regulations that prevent risky behaviour. Yellen said, “Already, for some, memories of this experience may be fading – memories of just how costly the financial crisis was.” She added, “The core reforms we have put in place have substantially boosted resilience without unduly limiting credit availability or economic growth.” Full article in TheGuardian.com here. 

In brief? Accommodative stance to support the economy but responsive lending guidelines to ensure only those who qualify gets the loan they applied for. Familiar? Haha. BNM’s accommodative stance for the economy maintained What did Trump said he would do? He is listening to executives on Wall Street and Republicans in Congress for looser financial regulations to spur growth. (What growth? Growth in actual business / trades or just growth in financial terms?)  In brief, Trump wished to roll back some of the regulations introduced earlier. Back in February, Trump said, “I have so many people, friends of mine, that had nice businesses. They can’t borrow money. They just can’t get any money because the banks just won’t let them borrow it, because of the rules and regulations in Dodd-Frank.” (Well, as long as applicants qualify, I do not see the rationale NOT to lend them the money they applied for)

A lot more could be read here. Mainly arguments from both ends. Full article in TheGuardian.com here.  The Dodd–Frank Wall Street Reform and Consumer Protection Act was signed in 2010 and brought with it hundreds of new regulations including tougher consumer lending rules and the need for banks to hold bigger capital reserves. (I think this is HEALTHY) In terms of the winner from this ‘disagreement,’ from now till end of 2018, Yellen is still the Federal Reserve’s chair. Trump holds the key of whether to reappoint her after that. OOPS. The current Fed vice-chair of financial supervision prefers to lessen the burden of regulation. As usual, too tight and nothing happens. Too lose and the next crisis may come again sooner than we can say, ‘Again??’ Happy following. I am on Yellen’s side on this one.

written on 28 Aug 2017

Next suggested article: Fed will raise rates soon because ‘waiting is dangerous.’  

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